Conversion of Arrest Warrants into Bailable Ones in Economic Offences Is Not a Matter of Right: Rajasthan High Court Refers Issue to Larger Bench in ₹10.65 Cr CGST Fraud Case

"Fake Firms, Crores in ITC Fraud and White-Collar Crime: Courts Must View Economic Offences Through a Different Lens" — In a significant order Rajasthan High Court refused to adjudicate a plea seeking the conversion of non-bailable arrest warrants into bailable warrants in an alleged ₹10.65 crore Input Tax Credit (ITC) fraud under the CGST and Customs laws. Instead, Justice Anoop Kumar Dhand referred the matter to the Chief Justice for constitution of a Special/Larger Bench, owing to conflicting decisions of coordinate benches on this precise legal issue.

The Court observed, “Serious allegations of tax evasion of crores of rupees have been levelled against the petitioner. The petitioner has made a prayer for anticipatory bail in the form of warrants.” The Court made it clear that in grave economic offences, the process of law cannot be diluted merely because the accused expresses a willingness to appear.

"White-Collar Crimes Are More Dangerous to Society Than Violent Offences" — Court Stresses National Impact of Economic Offences

The facts revealed that the petitioner, Nirmal Kumar Sharma, was accused of creating fake firms and claiming fraudulent ITC amounting to ₹10,65,23,833 under Section 132(1)(B)(C)(L) of the CGST Act, 2017 read with Section 132(1)(i) of the Customs Act, 1962. The trial court had taken cognizance and issued non-bailable arrest warrants. The petitioner challenged this action under Section 70(2) of the CrPC and Section 72(2) of the BNSS, seeking conversion into bailable warrants on the ground that he was willing to appear voluntarily.

Rejecting this contention, the High Court noted that economic offences need to be evaluated through a stricter lens, especially in bail matters. It referred to a long line of Supreme Court precedents, including Y.S. Jagan Mohan Reddy v. CBI (2013) 7 SCC 439, where the Apex Court held:

"Economic offences having deep-rooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole."

Justice Dhand reiterated that:

“Economic offence is always committed by a person with calculated design, profiting himself regardless of the consequences caused to the community at large.”

The Court held that liberty of the individual must be balanced against the financial health of the nation, especially when white-collar crimes deprive the exchequer of resources needed for national development.

“Mere Readiness to Appear Cannot Be a Passport to Bail in Economic Crimes” — Court Dismisses Notion of Right to Bailable Warrants in CGST Cases

Rejecting the petitioner’s reliance on the fact that the offence was triable by a Magistrate and punishable with five years imprisonment, the Court clarified:

“There cannot be any straightjacket formula to decide bail applications merely because the offence is triable by a Judicial Magistrate. Every case has to be judged on its own merits, nature of accusation and its impact on society.”

Referring to Nimmagadda Prasad v. CBI (2013) 7 SCC 466, the Court quoted:

“While granting bail, the court has to keep in mind the nature of accusations, nature of evidence, severity of punishment, character of accused and larger interests of the public and State.”

The Court noted that the petitioner had tried to project this petition as a procedural anomaly, but in essence, it was a disguised attempt to secure anticipatory bail through procedural relief without surrendering or facing investigation.

"Coordinate Benches Cannot Override Each Other — Judicial Discipline Requires Reference to Larger Bench"

Crucially, the case brought into focus two contradictory rulings from the Rajasthan High Court itself:

In P.C. Purohit v. Union of India (2025 Supreme (Raj.) 1527), a coordinate bench had allowed the conversion of non-bailable warrants into bailable ones, taking into account the accused’s assurance of cooperation.

In contrast, in Girdhar Gopal Bajaria v. Rajesh Kumar Sharma (S.B. Criminal Revision Petition Nos. 731–732/2021), another bench upheld the issuance of non-bailable warrants in an economic offence, relying on settled Supreme Court precedents which underscore the severity and special nature of economic crimes.

Justice Dhand noted the judicial conflict, stating:

“The judgment relied upon by the petitioner in the case of P.C. Purohit was passed in ignorance of the judgment passed in the case of Girdhar Gopal Bajaria.”

He emphasized the binding principles of judicial discipline, quoting the Supreme Court in S.K. Kapoor v. Union of India (2011) 4 SCC 589:

“It is well settled that if a subsequent co-ordinate Bench of equal strength wants to take a different view, it can only refer the matter to a Larger Bench. Otherwise, the prior decision is binding.”

Further, the Court relied on Central Board of Dawoodi Bohra Community v. State of Maharashtra (2005) 2 SCC 673, reiterating:

“A bench of co-equal strength cannot overrule a previous decision. In case of disagreement, reference to a larger bench is mandatory.”

Reference to Special Bench: Uniformity in Law Needed on Critical Bail Jurisprudence

Faced with two competing lines of reasoning, Justice Dhand observed:

“There is no exact and settled decision of this Court on the legal issue involved... there are conflicting opinions of different Co-ordinate Benches. Hence, the same is required to be decided for all times to come.”

Accordingly, the Court framed the following legal question for the Special/Larger Bench:

“Whether the arrest warrants issued against the accused committing economic offence or heinous offences like murder/rape/dowry death/dacoity etc. can be converted into bailable warrants as a matter of right by invoking the powers contained under Sections 70(2) Cr.P.C. and 72(2) BNSS?”

The matter was referred to the Chief Justice for constitution of an appropriate bench.

While refraining from granting relief to the petitioner, the Rajasthan High Court underscored a fundamental issue of criminal procedural law — whether economic offenders, upon mere expression of willingness to cooperate, can seek conversion of arrest warrants into bailable ones as a matter of right. The judgment forcefully asserts that economic crimes, though non-violent, have corrosive effects on the economy and democracy, and therefore, must be dealt with stringent legal standards.

The forthcoming decision of the Special Bench is poised to become a landmark in defining bail jurisprudence under the BNSS and CrPC, especially in relation to white-collar and economic offences under CGST, Customs, and PMLA laws.

Date of Decision: 13 November 2025